The
Employment Appeal Tribunal (EAT) has recently issued its decision in the case
of Bear Scotland Ltd –v- Fulton &
anor. This is a decision that employers and employees alike have been
eagerly anticipating as the appeals concerned whether the calculation of
holiday pay should include an amount in respect of “non-guaranteed”
overtime. This is overtime that the
employer does not have to offer to the employee but under the terms of their
contract the employee is obliged to accept it.
In
the UK we have the Working Time Regulations 1998 (WTR), which implement the
Working Time Directive. The EAT held
that under the Working Time Directive this “non-guaranteed” overtime should be
taken into account, and also that the WTR should be interpreted to give effect
to this. The ruling will apply to any overtime that is regularly worked,
whether or not it is compulsory.
The
reason for this decision is that under EU law workers are entitled to receive
their “normal remuneration” when taking holiday leave, and so where overtime is
regularly required by employers it makes sense this should be included as part
of normal remuneration. The EAT decision
is in accordance with the recent European decision of Lock –v- British Gas Trading Ltd.
Employers
should however note that whilst under the WTR workers are entitled to 5.6 weeks
holiday per leave year, the requirement to include the overtime payments only
applies to the 4 weeks entitlement that is conferred on workers by the Working
Time Directive. So whilst our domestic
law provides a more generous holiday entitlement than EU law, the EAT ruling
does not apply to the additional 1.6 weeks holiday entitlement that domestic
law provides.
The
key concern for employers has been whether this ruling will open the floodgates
for historical claims for holiday pay that previously did not include the
overtime. To an extent the EAT have
tried to restrict the scope for workers to recover underpayments. Employees will not be able to claim more than
3 months after the last incorrect payment.
There
are wide-reaching legal and practical implications arising from this
decision. The Business Secretary, Vince
Cable, has announced a task force will be set up to assess the impact of the
ruling on businesses.
Over coming weeks the full ramifications of the decision
will become clear so watch this space.
If you require
assistance in reviewing your holiday pay procedures or would like advice on how
best to manage this then please contact Marsha Robinson.
